Investment Management:

At Main Street Research, we view investing as a question of alternatives. These alternatives include individual domestic and foreign stocks, bonds and real estate (REITs). Our research has neither geographic boundaries nor capitalization restrictions.

Because our compensation is directly tied to the value of your investment portfolio, we have a vested interest in managing your portfolio’s risk and return. Thorough research is the cornerstone of our investment management process. Over 60% of our research is conducted in-house. This includes macro-economic analysis and sector, industry and company research. In addition, we employ 75 outside research firms to compliment our analysis. Our Research Partners include what we believe to be “best in class” independent research firms as well as global investment banks. In combination, our in-house research and our Research Partner’s analyses exceed the resources of any single investment firm, reducing the risk of “one opinion” decision making and enhancing the potential for return and long-term investment success.

Your personal circumstances, goals and wealth planning serve as the basis for our initial strategy and required rates of return. The result of our macro-economic research process completes the investment portfolio’s overall asset allocation.

History provides great evidence that, over long periods of time, there is a direct correlation between changes in the economy (the business cycle) and the performance of financial instruments. Over the long term, the macro-economic variables that drive the global economy – such as interest rates, inflation and corporate profits – affect the long-term direction of stock, bond and real estate prices. Therefore, our search for the best opportunities within the investment landscape begins with an understanding of the global economic climate and business cycle. From this analysis, we formulate an 18-month global economic and asset class outlook which serves as the basis for asset allocation recommendations.

We believe that successful long-term investment performance is the result of above average investment selection combined with careful risk management. Our Active Risk Management (ARM) is a process employed to manage potential downside risk due to factors that include global economic instability, economic sector or industry weakness, and deterioration in a specific security's fundamentals. It includes tools and formulas that can affect a portfolio’s asset allocation, sector and stock exposure.

ARM is a process that is continually applied to your investment portfolio depending on the health and stability of financial markets. ARM may cause your portfolio to experience periods of reduced exposure to particular sectors, industries or individual securities, as well as increased cash and fixed income balances. Though risk management does not guarantee against investment loss, we believe that, over the long run, our ARM process mitigates risk and leads to above average investment results.

We do not believe that investors should sacrifice performance for tax efficiency. Our goal is to pursue an investment style designed to be highly tax efficient. Our average portfolio turnover is only 20% annually – significantly lower than that of most mutual funds according to Morningstar¹. Most importantly, when successful, this allows you to retain a greater amount of your assets each year, which fosters the long-term compounding of your wealth. Since our fees are based on the value and performance of your portfolio, we are cost-conscious. Our use of individual securities, as opposed to mutual funds and other investment “products”, assists in keeping costs low and can reduce the possibility of hidden or layered fees. Additionally, we work closely with the custodian of your assets in an effort to keep your transaction costs to a minimum.

¹Bankrate.com: Mutual Fund Turnover and Taxes, Bankrate.com